Paycom beat every line, then spent $1.39 billion on buybacks while carrying $750 million of debt

Paycom beat everything, and the stock fell anyway

Paycom▼−6.76% — Paycom, down 6.76 percent today Software, the Oklahoma City payroll and HR software company founded by Chad Richison, reported third-quarter results↗ on Wednesday November 4, 2026, that cleared every bar: revenue up 10.2% to $543.8 million, adjusted EPS of $3.37 about 20% above the $2.80 analysts expected, adjusted EBITDA of $268.1 million against a consensus of $235.7 million, and a raised full-year outlook ¹³.

Richison credited the "tremendous ROI" clients get from the platform's automated decisioning and said the company was "once again raising our full-year outlook" ¹. Shares still fell 4.8% to $254.90 after the release ³. The reason was not the income statement. It was two pages further in.

The debt did not exist a year ago

The release shows Paycom drew $900.0 million on its credit facility this year, spent $1,390.9 million buying back stock in nine months against $218.9 million a year earlier, and carried long-term debt of $750.0 million at September 30, against none at the end of 2025 ¹. Shares outstanding dropped from 54.8 million in December to 44.3 million by September 30, about 19%, and diluted shares in the quarter fell to 44.5 million from 56.4 million ¹².

Cash fell to $193.9 million from $370.0 million; stockholders' equity shrank to $707.3 million from $1,731.5 million ¹. Operating income rose 74%, but most of the jump in earnings per share is arithmetic on a shrinking denominator, not growth in the business ¹.

The margin was partly manufactured

The 49.3% adjusted EBITDA margin, up from 39.4% a year earlier, was fed from the cost side too: research and development expense was cut to $38.5 million from $74.1 million, capitalized development costs to $17.4 million from $43.5 million, and stock-based pay to $20.3 million from $31.1 million ¹. Paycom's own filing history↗ shows the squeeze started earlier: R&D expense fell 30.6% year on year in the second quarter of 2026, after years of double-digit increases ⁵.

The buybacks ran ahead of the cash

Free cash flow for the nine months rose to $536.5 million from $285.4 million, a genuinely strong number ¹. It is also less than half the $1,390.9 million of stock repurchased ¹, and the gap tracks the $900.0 million drawn on the credit facility ¹. On November 5 the company added a first cash dividend of $0.375 per share↗, its first ever ⁴, on top of the buyback and the $750 million of debt ¹.

The bull case, stated fairly

The other side has real evidence. Recurring revenue is 95.5% of sales, the customer acquisition payback period is 12 months, billings grew 10.1% to $544.7 million, and full-year EBITDA guidance of about $1.07 billion sits well above consensus ¹²³.

Richison's pitch is that a mature, seat-priced payroll business should return cash, and Dealroom notes the raise ranks near the 90th percentile of post-IPO software debt deals↗ ². Fair. But guidance implies about 8% growth for 2026, down from 17.2% compounded annually over the past five years, and sell-side analysts project 6.3% over the next twelve months ¹³.

The market has already priced this trade-off once this week: HubSpot▼−6.76% — HubSpot, down 6.76 percent today, the marketing-software company, beat on EPS and widened its margin and still fell 4.2% to $207.05 when its next-quarter revenue guidance came in below consensus↗ ⁶.

The lever has less room to run

Earnings per share is growing faster than the business underneath it, and $750 million of debt now sits under a company guiding to 8% revenue growth ¹. Watch the 2027 guidance in the fourth-quarter release and the dividend's first full quarters: if revenue growth stays near 8% while interest and payouts come due, the share-count lever has less room to run ¹.